FATCA: Delayed Start Dates: IRS and Treasury Department Announce Delay of FATCA ImplementationSullivan & Cromwell LLP - July 15, 2013
On July 12, 2013, the Internal Revenue Service (the “IRS”) and Treasury Department released Notice 2013-43 (the “Notice”), announcing a six-month postponement to the start of withholding and account due diligence required by the foreign account tax compliance provisions (“FATCA”) of the Hiring Incentives to Restore Employment Act of 2010.
The Notice announces a new timeline that extends many FATCA-related deadlines beyond the January 1, 2014 effective date provided by the final regulations issued in January 2013 (the “Final Regulations”). The Notice explains that this extension is being provided to allow more time to complete agreements with foreign jurisdictions (so-called “intergovernmental agreements” or “IGAs”) and provide foreign financial institutions (“FFIs”) with additional time to implement compliance procedures. In conjunction with the Notice, the IRS and Treasury Department issued a press release stating that the changes in the Notice were prompted by “overwhelming interest” in IGAs, and announcing that the Treasury Department is engaged in conversations about potential IGAs with more than 80 jurisdictions.
The revised timeline:
- Postpones the start of FATCA withholding until July 1, 2014;
- Amends the definition of “grandfathered obligation” to include obligations outstanding on July 1, 2014;
- Amends the definition of “preexisting obligation” to include obligations outstanding on June 30, 2014;
- States that FFI Agreements entered into on or before June 30, 2014 will have an effective date of June 30, 2014, effectively postponing the deadlines for completing due diligence on preexisting obligations for six months;
- Delays the deadline for FFIs to finalize their registration on the FATCA registration website to April 25, 2014 by postponing the release of the first IRS FFI List until June 2, 2014;
- Extends the foreign targeted registered obligation rules to obligations issued before July 1, 2014; and
- Delays the expiration of Chapter 3 withholding certificates and agreements that would expire on or before December 31, 2013 to June 30, 2014.
The Notice announces corresponding changes to the model IGAs and provides additional guidance concerning the treatment of financial institutions located in jurisdictions that have signed IGAs but have not yet brought those IGAs into force.